At AMRO’s first-ever press conference in Myanmar on Friday afternoon, Hoe said the growth would be driven by expanding public spending and exports as well as a pick-up in agriculture and manufacturing activities. He considers garment and tourism as the most promising sectors in the long run.

“We see the conflicts in Rakhine State as ‘pretty localised’, although it may have some impacts on the business sentiment,” he said.

Yet, he did not underestimate potential impacts of the international pressures on the government. If the European Union decides to withdraw its trade preference, then it will be a big blow for Myanmar’s economy, as garment is currently the main driver of Myanmar’s growth, he said.

“Myanmar is still very competitive thanks to its low wages. Even if you lose your preferential access to Europe, it is possible for Myanmar to find other markets where you can export garment products,” he said.

“Another important sector is tourism, which is booming everywhere in Asia, thanks to the rise in Chinese and Korean visitors. Asia is where the middle-class people are spending very rapidly, and they are the main consumers of tourism services.”

Additionally, Hoe sees high potential for sustainable growth in Myanmar but he urges to mobilise the resources, increase revenue and gross domestic product (GDP).

“Low revenue and GDP ratio could be the constraints for the government. Weak fiscal revenue continues to be a challenge owing to slow-growing tax revenue. And SEEs [State economic enterprises] are shrinking,” he said.

According to Hoe, enhancing tax revenue, optimising the use of fiscal resources, adhering to medium-term fiscal discipline, strengthening the public debt management framework, pushing forward SEE reforms and encouraging the private sector would help strengthen the nation’s fiscal position.

“Gradual liberalisation of interest rates should enhance policy effectiveness in the medium term. The implementation of new banking regulations will enhance the soundness and resilience of the financial system in the medium term,” he said.

He urged to implement new banking regulations, and to build up international reserves through flexible management of the exchange rate. He also recommended developing a market-based economy, upgrading the key infrastructure including electricity and logistics, strengthening the education system with an emphasis on vocational training to provide talents, improving business sentiment and investor confidence, facilitating foreign direct investment, and strengthening the rule of law.

“What you really need to grow is the private sector. More importantly, you need to focus on growth areas. Among the SEEs, the loss-making ones should be growing,” he said.

“Myanmar urgently needs to do structural reforms. It is a hard work but it should be done.”

Hoe stressed the importance of creating more jobs by pointing out that there are thousands of Myanmar citizens working in Thailand and Malaysia due to the lack of jobs in the country.

“Going overseas [to work] is not bad. For example, the Philippines usually get a large number of remittances from their people working in other countries. But, creating more jobs is really important for Myanmar to grow further,” he said.

Hoe said Myanmar could take advantages of the goodwill of other nations in the region, driven by the rise in intra-region investment. Though Myanmar’s political situation is quite complicated, it still can expect the relocation of investment from bigger countries like China and Korea.

He urged improvement in infrastructure and regional connectivity to attract more investors. “A lot of infrastructure projects are not commercially viable. So, funding has become an issue. You need to ensure low concessional rate for implementation of infrastructure projects. Even debt is not enough,” he said.

Hoe lauded the reforms undertaken by the government over the past few years. However, he thinks it will take time for the government to improve the business sentiment.

“Over time, investors will recognise that the government is really serious about reforming the economy and that will help improve the sentiment,” he said.

“In the short run, there are issues that need to be addressed and some legacy problems you have to deal with. You need to make the financial system more sound and viable. I am glad that the officials are committed to doing it.”

Jae Young Lee, group head and lead economist at AMRO, urged the country to focus on tax administration including tax revenue mobilisation, broadening the tax base, reforming the tax regime with an emphasis on consumption tax and income tax.

Jae said AMRO had discussed with Myanmar officials to create room for improvement of the private sector by providing them with opportunities to expand more.

Source: http://www.nationmultimedia.com/detail/Economy/30355989